Term Insurance Vs Whole Life Insurance: Which Is Right For You?

Life insurance enables the insured to transfer their risk to the insurer, ensuring the future security of their dependents. We come to understand the importance of insurance in our lives through minor mishaps or unanticipated risks. An individual cannot control whether they face risks or uncertainties. The individual and their family are directly impacted by the belief that insurance is unnecessary, since the family suffers both financially and emotionally in the event that a wage earner passes away suddenly.

Before choosing the type of insurance to buy, one must thoroughly understand both individual types (term vs whole life insurance) and all the life insurance tax benefits.

What is Term Insurance? 

Term insurance provides a death benefit to the nominee in the event of the insured’s passing for a predetermined amount of time, as the name implies. However, since there is no maturity benefit, the policy is useless if the policyholder lives past the insured period. The advantage in this situation is the low premium, which draws in a lot of buyers, the majority of whom are in the 25–30 age range. The catch is that term insurance costs keep going up over time. This, along with the “no maturity benefit” clause, prompts the client to consider the life insurance plan’s long-term advantages.

What is Permanent/Whole Life Insurance? 

On the other hand, Whole life or permanent life insurance has a fixed premium, despite being expensive. Both, a death benefit and an income benefit, are available. Whole life insurance is recommended for people over the age of 40. Such people require both life insurance and financial security, because they have more obligations to their spouses and children. The customers’ only concern when purchasing whole life insurance is the high premium cost.

Term Insurance vs Whole Life Insurance

Consider the factors like age and purpose to determine which insurance to purchase. To save money on early-life premiums, someone as young as 25 should choose a term plan and convert it into whole-life insurance. However, someone who is 40 years of age or older should think about getting permanent life insurance. But before purchasing the latter, one must make sure they have paid off all of their debts, are in good health, are financially stable, and have enough money for their children’s education and other expenses. You can also use a term insurance calculator to determine the precise premium that needs to be paid for the policy.

The following table with a few parameters helps to evaluate which insurance plan is right for you as per your requirements:

Parameters   Term Insurance  Whole Life Insurance 
Premiums  The premium amount of a term insurance plan is comparatively lower than the whole life insurance plan  Premium amount remains constant throughout the tenure of a whole life insurance policy, unlike term insurance plans, where they might get an increase at the renewal time. 
Tenure  A term insurance plan generally has certain policy tenure to avail plan benefits  Flexible tenures are offered till the life assured is 100 years. The survival or maturity benefits are paid out once the life assured completes 100 years. 
Cash Value  In a term insurance plan, the amount of loan is subtracted from the Sum Assured, as the insurance company accrues interest.  Premiums paid by the policyholder for a whole life insurance plans may at times give more returns. An insurer can announce a bonus in case it makes proceeds and provides you a loan at viable rates of interest. Whole life policies allow you to add your savings while offering protection from future uncertainties. 

*All savings are provided by the insurer as per the IRDAI-approved insurance plan. Standard Terms & Conditions Apply

Which One To Choose?

If you are single and young, in your 20s or 30s, a term insurance plan is the best option. The lower the premium with a high sum assured will be, the earlier you purchase. Additionally, term insurance plans offer good returns quickly if you have any current health issues. You must terminate the current term plan with a whole life plan rider when you are in your 30s and married. This gives you two benefits: the term plan’s cash value and the financial benefits of the rider for your loved ones in the event of your absence. You should choose whole life insurance plans when you are in your 40s. This plan safeguards your family’s future after your passing away and provides lifetime coverage for you. Decide on the best plan by keeping the aforementioned points in mind.

It is always best to understand both the types of insurance thoroughly before purchasing either term or whole life insurance, as well as understanding the life insurance tax benefits associated with either of these insurance plans. You should also remember your age and why you’re buying the insurance.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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